Investing in one or more actively managed funds can help with diversification. That's important for managing risk and again, an active fund manager may be in a better position to hedge against potential volatility compared to funds that take a passive approach and simply track an index.

Do actively managed funds perform better?

When things go well, actively managed funds can deliver performance that beats the market over time, even after their fees are paid. But investors should keep in mind that there's no guarantee an active fund will be able to deliver index-beating performance, and many don't.

Why are actively managed funds bad?

However, mutual funds are considered a bad investment when investors consider certain negative factors to be important, such as high expense ratios charged by the fund, various hidden front-end, and back-end load charges, lack of control over investment decisions, and diluted returns.